When McDonald's said it intended to launch an entirely new brand, the company's goal seemed unclear.
It already had the ability to offer small format versions of its eponymous brand. Therefore, simply being able to operate with less square footage didn't seem like a good reason to create a mostly new menu with a different brand.
Now that the first CosMc's has opened, it seems clear that McDonald's (DCM) – Get a free report wants to compete with Starbucks and Dunkin' in the lucrative beverage space. This makes sense because beverages, even labor-intensive ones, have wide profit margins.
Related: Burger King's menu tries something new with the Whopper
It should be noted that CosMc's sells coffee, but it is not a coffee-based brand. Unlike Starbucks, (SEX) – Get a free report Although it still maintains coffee as its main focus, the McDonald's spin-off has adopted everything that is drunk (aside from alcohol) as its raison d'être.
“CosMc's menu is rooted in beverage exploration, with bold and unexpected flavor combinations, vibrant colors and functional enhancers,” the company said in a press release. “You'll see a variety of specialty lemonades and teas, delicious mixed drinks, and cold brew coffee—think Sour Cherry Energy Slush, Tropical Spiceade, and S'mores Cold Brew.”
The new chain will also sell some innovative snacks and will borrow Egg McMuffins (offered all day) and McFlurries from McDonald's main menu.
CosMc's offers McDonald's a high-margin formula that is not affected by volatile meat and poultry prices, and gives the company exposure to the non-food market where Starbucks and Dunkin' have excelled.
Yum Brands (Hmm) – Get a free report Taco Bell sees the same opportunity and has been testing its own way to expand its beverage platform.
Image source: Shutterstock
Taco Bell tries an iced coffee
Taco Bell has always embraced the idea of being able to serve customers outside of traditional dining hours. In commercials, the chain jokingly used the term “fourth meal,” which leaned toward the idea that it might be the poor choice people make late at night after they've had dinner.
The company has also embraced soft drinks and frozen beverages beyond traditional fast food soft drink offerings. Taco Bell has long offered its slushie-style Freeze drinks in a variety of ever-changing flavors, including some related to the popular Mountain Dew flavors. But it has never offered frozen coffee-based drinks.
Now, the chain is going after Starbucks in its own way with its own Frappuccino-style frozen coffee drinks.
Taco Bell's new coffee coolers are being tested in limited locations in California. They are offered as a menu item all day long. The chain is testing Coffee Chillers and Churro Chillers flavors in select stores starting December 15.
These are the new Taco Bell drinks
Taco Bell currently sells basic hot and iced coffees nationwide. It also has a partnership with Cinnabon to sell coffee in its signature flavor, both hot and iced versions.
“The Coffee Chiller is served in a 16-ounce mug filled with flavor inside, filled with an iced coffee blend and topped with a layer of cold foam, available in Mexican Chocolate, Caramel Churro and Spiced Vanilla.” chew boom reported.
“The Churro Chiller is served in a 16-ounce cup that's also packed with flavor on the inside, filled with sweet shake mix and topped with a layer of cold foam and crumbled churro, available in Mexican chocolate, dulce de leche coffee and wild coffee. Strawberry and Sweet Vanilla.”
The new drinks sell for $4.19 and are not part of any happy hour promotion.
Taco Bell has not said how long the test will last. The chain has a long history of testing an item locally and then rolling it out nationally over the next few months if the test is successful.
Discuss trading ideas with experienced hedge fund managers and day traders. Get real money Pro now.
